The Beginning Of The End For The Affordable Care Act? Largest US Health Insurer May Exit ObamaCare

Tracking the slow motion trainwreck of
Obamacare has become one of our preferred hobbies: below is just a
random sample of headlines covering just the most recent tribulations of
the "we have to pass it to find out what's in it" Unaffordable Care Act:

But the most surprising article we wrote was our explanation from three weeks ago explaining why "Your Health Insurance Premiums Are About To Go Through The Roof" showing that even insurance companies have been unable to earn a profit under Obamacare, as shown in the following chart:This was a stunning revelation because, after all, the Affordable
Care Act was largely drafted by the insurance industry itself, and if
for whatever reason, it itself was unable to capitalize on Obamacare, then it has truly been a disaster.Today we got confirmation of this when none other than the U.S.’s
biggest health insurer, UnitedHealth, cut its 2015 earnings forecast
with a warning that it was considering pulling out of Obamacare, just
one month after saying it would expand its presence in the program.According to Bloomberg, "UnitedHealth Group would scale back marketing efforts for plans it’s selling this year under the Affordable Care Act, and may quit the business entirely in 2017 because it has proven to be more costly than expected."This was precisely what we cautioned on November 2. Fast forward to today when UnitedHealth said in a statement that "the
company is evaluating the viability of the insurance exchange product
segment and will determine during the first half of 2016 to what extent
it can continue to serve the public exchange markets in 2017."Needless to say, the implications for Obamacare - which has seen a
surge in tangential problems in recent months - are dire: "A pull-back
would deal a significant blow to President Barack Obama’s signature
domestic policy achievement. While UnitedHealth has been slower than
some of its rivals to sell Obamacare policies since new government-run
marketplaces for the plans opened in late 2013, the announcement may
indicate that other insurers are struggling, said Sheryl Skolnick, an
analyst at Mizuho Securities. “If one of the largest and presumably, by reputation and
experience, the most sophisticated of the health plans out there can’t
make money on the exchanges, then one has to question whether the
exchange as an institution is a viable enterprise,” Skolnick said.UnitedHealth further said it suspended marketing its individual
exchange plans and is cutting or eliminating commissions for brokers who
sell the coverage.What is surprising is that for UnitedHealth, its Obamacare-facing
exposure is relatively limited: the company covers fewer than 550,000
people on the Obamacare exchanges. About 9.9 million people had
insurance through the U.S.- and state-run insurance markets as of June
30. This means that all other insurance companies must be getting
crushed, something which the market also noticed earlier today hitting
the stocks of not only hospitals, such as CYH, HCA, LPNT, THC and UHS
but also home health care providers as well such as AFAM, AMED, GTIV and
LHCG.What is perhaps even more perplexing is the abrupt shift in posture:
just last month, UnitedHealth had struck a more optimistic note. I think
we’ll see strikingly better performance on the insurance exchange
business” next year, Chief Financial Officer David Wichmann told
analysts on an Oct. 15 conference call."Perhaps he had not seen the P&L? Oh well, he certainly did in the subsequently 4 weeks.The rest of the story is well-known and has been covered here
extensively in the past: the inability of businesses to turn a profit
from Obamacare has meant that about a dozen non-profit “co-op” plans
created under the Affordable Care Act have failed, after charging too
little to cover the cost of patients’ medical care, and because an Obama
administration fund designed to stabilize the market paid out just 12.6
percent of what insurers requested. And Anthem last month said some
rivals were offering premiums too low to provide the coverage patients
require and book a profit.At the end of the day, the worst news is not for the corporations,
since Obamacare is not going away any time soon. It simply means that
what until now were supposedly Affordable plans under Obamacare, will
soon become (even more) Unaffordable as
insurer after insurer hikes premiums dramatically in order to make the
biggest US governmental intrusion into the private sector in recent
decades profitable to shareholders.Or, as we explained three weeks ago, "Your Health Insurance Premiums Are About To Go Through The Roof"